Authorization of transactions is a key control in most organizations. Authorizations should not be made by individuals who have incompatible functions. For each transaction (listed as A through I), indicate the individual or function (e.g., the head of a particular department) that should have the ability to authorize that transaction. Briefly provide a rationale for your answer. Writing off old accounts receivable. Committing the organization to acquire another company that is half the size of the existing company. Paying an employee for overtime. Shipping goods on account to a new customer. Individual(Salesperson)- The salesperson may ship the goods which can be supervised by a senior. Purchasing goods from a new vendor. Individual- The purchase manager is responsible for acquiring goods from new vendors Temporarily investing funds in common stock investments instead of money market Funds. CEO Purchasing a new line of manufacturing equipment to remodel a production line at one of the company’s major divisions (the purchase represents a major new investment for the organization). Replacing an older machine at one of the company’s major divisions. Rewriting the company’s major computer program for processing purchase orders and accounts payable (the cost of rewriting the program will represent one quarter of the organization’s computer development budget for the year).

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Authorization of transactions is a key control in most organizations. Authorizations

should not be made by individuals who have incompatible functions. For each

transaction (listed as A through I), indicate the individual or function (e.g., the head of a

particular department) that should have the ability to authorize that transaction.

Briefly provide a rationale for your answer.

Writing off old accounts receivable.
Committing the organization to acquire another company that is half the size of the

existing company.

Paying an employee for overtime.
Shipping goods on account to a new customer.

Individual(Salesperson)- The salesperson may ship the goods which can be supervised by a senior.

Purchasing goods from a new vendor.

Individual- The purchase manager is responsible for acquiring goods from new vendors

Temporarily investing funds in common stock investments instead of money market

Funds. CEO

Purchasing a new line of manufacturing equipment to remodel a production line at

one of the company’s major divisions (the purchase represents a major new

investment for the organization).

Replacing an older machine at one of the company’s major divisions.
Rewriting the company’s major computer program for processing purchase orders

and accounts payable (the cost of rewriting the program will represent one quarter

of the organization’s computer development budget for the year).

Definition Definition Financial market that deals in securities or assets that are short-term in nature. The money market is responsible for keeping up the liquidity of the businesses and the organizations. These securities are usually held for a period of 12 months or less and are issued by institutions that require cash or funds for their short-term cash flow requirements. The money market is regulated by the federal government.

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